MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
July 2017 • Vol. 29 No. 7
The official publication of the Massachusetts State Automobile Dealers Association, Inc
The Original
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Ligia Flores Administrative Assistant/ Membership Coordinator lflores@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jbernal@msada.org. Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory Blum Shapiro 20 Boston Herald 28 Channel Building Company 19 Ethos Group 2 Lynnway Auto Auction 21 Nancy Phillips Associates 20 O’Connor & Drew, P.C. 27 Southern Auto Auction 18
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Ta b l e o f C o n t e n t s
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From the President: Examining a Classic THE ROUNDUP: Legislative Public Hearings Ramp Up; New Protections for Pregnant Workers Become Law legislative scorecard TROUBLESHOOTNG: Employers Must Accommodate Medical Pot Use
12 AUTO OUTLOOK 14 Cover Story: The Original
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LEGAL: Summertime: The Right Time for a Warranty Parts or Labor Reimbursement NEWS From Around the Horn nada Market Beat TRUCK CORNER: Stars & Stripes Fly High as Truck Dealers Roll into D.C. nada update: Healthy Demand in U.S. Auto Sales
ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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Massachusetts Auto Dealer JULY 2017
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From the President
MSADA
Examining a Classic
Revisiting our storied past provides insight into our future
By Chris Connolly, MSADA President The only constant in the automotive retail business is change. But as we grapple with the latest technology, in our showrooms and in our laptops or smart phones, it is important to remember that our business is built on the excitement of putting the latest auto technology in the hands of our communities. This month, as hopefully we get a chance to take in some sun and enjoy time with our families, this month’s Auto Dealer presents the story of the first Massachusetts entrepreneur who saw that the automobile belonged in the hands of his neighbors. While NADA celebrates its centennial, a remarkable milestone for our industry as a whole, we should be proud that our automotive retail history in the Commonwealth goes back to the waning days of the 19th century, when the horseless carriage was a novelty with untapped potential. Alvan Fuller was a visionary who knew the most exciting part of the automobile was helping everyone get their hands on one. He worked hard to build a successful business, one that his family continues to this day. As an industry, we build every day on Fuller’s gumption and dedication to his customers. You can read more about his story in our cover story, on page 14. While it is true that the past two decades of Internet technology advancements have added entirely new levels of competition, marketing, and strategy, we will ultimately win or lose based on whether we treat our customers as we would want to be treated. As we face these constant changes from various corners of the industry, it is more important than ever that we dealers band together in making sure that we have all the information available to us to help reinforce how we go about upholding the basics. Your Association works every day to make sure our member dealers have the access to the information they need to succeed in the marketplace as a group. Looking back on the past century, how many family businesses have been there dayin and day-out across generations in our communities? Invariably, they are dealerships. While many of us can trace our roots to the 1950’s boom or are relative newcomers, a fair number of us date back to these earliest days, when putting people in cars required a trust not unlike the self-driving car will require of us soon. Trust is complicated in how it unfolds, but basic in that it comes down to a gut feeling, even amid all the noise of our modern era. The specifics of how trust is earned and kept in your dealership are what keep us showing up a few minutes (or hours) early and staying late into the night each day. As we continue to celebrate 100 years nationally and here at MSADA, please do reach out if you have a story you would like to share. And as always, if you have any ideas about how the Association can help make your operation run more smoothly, I encourage you to get in touch with me or Executive Vice President Robert O’Koniewski at (617) 451-1051. t JULY 2017
Massachusetts Auto Dealer www.msada.org
Msada Board Barnstable County
Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Woodworth Motors John Hartman, Ira Motor Group
Franklin County
Jay Dillon, Dillon Chevrolet
Hampden County
Jeb Balise, Balise Auto Group
Hampshire County
Bryan Burke, Burke Chevrolet
Middlesex County
Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru
Norfolk County
Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County
Christine Alicandro, Marty’s Buick GMC Isuzu
Suffolk County
Robert Boch, Expressway Toyota
Worcester County
Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]
Immediate Past President Scott Dube, Bill Dube Hyundai
NADA Director
Don Sudbay, Jr., Sudbay Motors
Officers
President, Chris Connolly, Jr. Vice President, Charles Tufankjian Treasurer, Jack Madden, Jr. Clerk, Steve Sewell
Associate Members
MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Chris Peck (508) 314-1283 Boston Globe Mary Kelly and Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Willie Beck (703) 394-1323 Catalogs.com David Solar (954) 908-7122 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Glenn Anderson (919) 247-6658 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Greg Gomer (617) 967-0303
Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Bob Lowery (713) 302-5547 GW Marketing Services Gordon Wisbach (857) 404-0226 Harbor First Ron Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 Independent Power Systems Mariana Seabra/Ryan Ferrero (978) 998-4079 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Rob Stansbury (484) 326-9765 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004
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Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Daryl Swanson (617) 269-4510 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Richard Anderson (401) 432-0749 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 SPIFFIT Sean Ugrin (303) 862-8655 Sprague Energy Claude Peyrot (603) 430-7254 SunPower Christie McCarthy, (408) 457-2357 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Stephen Janetz (215) 986-8498 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup Legislative Public Hearings Ramp Up; New Protections for Pregnant Workers Become Law By Robert O’Koniewski, Esq. MSADA Executive Vice President rokoniewski@msada.org Follow us on Twitter - @MassAutoDealers
Now that the state is past the point of approving a spending plan for FY 2018 — $39.5 billion that astute observers think is balanced on paper only as the Commonwealth continues to see shortfalls in tax collections — the legislative committees have kicked up the frequency at which public hearings are being held, albeit in time for the solons to break for their August vacation. Throughout the month your legislative team has been actively presenting our positions to legislators at public hearings and in private meetings. On July 11 the Joint Committee on Financial Services, co-chaired by Rep. Aaron Michlewitz (D-Boston’s North End) and Sen. James Eldridge (D-Acton) took testimony on a number of auto-related and motor vehicle insurance bills, including the following: • Insurance Labor Rates Paid to Auto Body Repairers. Filed by Reps. Lou Kafka (D-Stoughton)(H.546) and Sen. Jim Welch (D-Springfield) (S.599), these bills would establish a process for setting insurance reimbursable labor rates paid to auto body repairers that is in line with the current economics of the industry in Massachusetts. The average rate presently paid by insurance companies to repairers is the lowest in the country. This bill is strongly supported by your association and the auto body repair industry and strongly opposed by the auto insurance companies. • Motor Vehicle Service Contracts. In addition to creating a regulatory framework to oversee the sale and implementation of motor vehicle service contracts, this legislation would prohibit OEMs from requiring dealers to exclusively sell OEM-only extended service contracts or extended maintenance plans. The bill, S.570, was JULY 2017
Massachusetts Auto Dealer www.msada.org
filed by Sen. Kathleen O’Connor Ives (D-Newburyport). This bill is opposed by the OEMs and their captive finance arms. (Note: The identical bill has been filed by Rep. Angelo Puppolo (DSpringfield)(H.190), but it is before the Joint Committee on Consumer Protection and Business Regulation, which held its public hearing on June 20.) • Diminished Value. This bill (H.588) would create an administrative process for vehicle owners to appeal to get diminished value of damaged vehicles returned to the vehicle owner. Filed by Rep Chris Walsh (D-Framingham), the bill is supported by your association. No one testified against it, but the auto insurance industry has strongly opposed similar legislation previously. On July 13 the Joint Committee on Transportation, co-chaired by Sen. Tom McGee (D-Lynn) and Rep. William Straus (D-Mattapoisett), conducted a hearing on several electric vehicle bills, including Senate 1915, An Act Promoting Zero-Emission Vehicles. Massachusetts is one of nine states – along with Connecticut, Maine, Maryland, New Jersey, New York, Oregon, Rhode Island, and Vermont – that have adopted the California emission standards, including rules regarding zero emission vehicles (ZEVs). The franchisor manufacturers operating in these nine states, as a result of needing to comply with the regulations promulgated by the California Air Resources Board, are presently under the gun to meet the CARB standards for the ZEV mandate. This rule requires, beginning with Model Year 2018 vehicles, that up to five percent (5%) of all vehicles “sold” by a manufacturer be either battery electric vehicles (BEV) or plug-in
MSADA hybrid electric vehicles (PHEV). To put this in context for Massachusetts, in 2016 our franchised dealers sold just north of 330,000 new cars and trucks, yet the hybrid/electric vehicle market share in Massachusetts was just three percent (3%), an increase over the 2.5% in 2015 but well below the peak year of 3.9% in 2013. Our franchised dealers have been active participants in the state’s MOR-EV program, which supports customer purchases of ZEVs with a rebate of up to $2,500 per vehicle. Since January 2016, the Commonwealth has issued over 4,000 rebates, totaling over $8 million. Our member dealers have aggressively marketed and attempted to sell all ZEVs which their franchisor manufacturers deliver to them. (By “deliver to them” I mean “which the dealers must buy from their manufacturers pursuant to their franchise agreements.”) However, there are a number of barriers to ZEV sales, including, but not limited to, consumers facing higher prices for EVs with limited range when compared to the gasoline-fueled models, as well as a lack of investment in readily available charging infrastructure. Environmental groups have accused dealers of being apathetic, unknowledgeable, and unsophisticated salespeople of EVs. This is nothing but scapegoating, quite frankly. Dealers are highly motivated to sell each and every product on their lots, once they are delivered to them (once they buy them from the manufacturer), because dealers own these vehicles and incur substantial finance costs on each vehicle they hold in inventory until the vehicle is retailed. A major concern amongst franchised dealers and the dealer associations in these nine states is how the ZEVs get counted in order for the manufacturers to receive credit for a sale under the current regulations. The current CARB rules award credits when the manufacturer delivers vehicles for sale to a dealer, not when the vehicles are actually retailed and put on the street. Our association, collectively with the other state and metro associations representing franchised dealers in the aforementioned eight states above,
have expressed our concern to CARB that, by awarding ZEV credits in this manner, the regulation removes the incentive for a manufacturer to deliver a vehicle to the market at a price and with equipment that will sell. The manufacturers frequently pressure dealers to buy unpopular or slow-moving product in exchange for receiving more generous allocation of more popular products. In the matter concerning ZEVs, however, the environmental benefits intended with ZEVs cannot be achieved until or unless those vehicles are placed in service, which only occurs following a ZEV’s retail sale or as part of a fleet sale. As the Committee and ultimately the General Court contemplate statutory provisions designed to improve ZEV sales, there needs to be a comprehensive and cooperative approach that involves state and local governmental bodies, pertinent private entities who can assist with charging infrastructure commitments, the vehicle manufacturers, and the franchised dealers who carry the actual financial burden of retailing and servicing these vehicles once purchased from their franchisor manufacturers. Finally, as it relates to the CARB regulation regarding “delivered for sale”, as stated previously, we must operate under the CARB’s meaning that each respective manufacturer’s credit percentage is determined based upon the delivery of the vehicles to franchised dealers, not when the vehicles are actually sold at retail or as part of a fleet sale. MSADA and our sister associations in the other eight states firmly believe that the credit should accrue when the vehicle is titled, registered to a customer, and then driven over the curb. It is a significant concern of our member dealers that their franchisor manufacturers simply dump vehicles on dealers, forcing them to buy in amounts necessary for the manufacturers to meet the CARB obligations for “delivered for sale.” We have asked CARB to review this particular regulation, and they have agreed to do so. There is no timeline attached with that review. www.msada.org
Continuing through the month, the Joint Committee on Consumer Protection and Professional Licensure held a hearing on July 18 to take testimony on our proposed amendments to Chapter 93B, the motor vehicle franchise law (H.1976, filed by Rep. Brendan Crighton, D-Lynn, and S.146, filed by Sen. Marc Pacheco, D-Taunton). MSADA President Chris Connolly of Herb Connolly Motors testified in favor of the bills. The manufacturers, naturally, opposed them. The issues being addressed by the 93B legislative proposals are the following: • Prohibits vehicle surcharges by manufacturer to pay for warranty reimbursement at the statutorily required retail rate; • Limit how often the manufacturer can request a facility upgrade; • Prohibits a manufacturer from requiring a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer or distributor by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality from a vendor chosen by the dealer; • Protects dealer’s customer data from OEMs and other third parties; • Prohibits an OEM from arbitrarily or unreasonably altering the geographic area of responsibility within which it measures the dealer’s performance; • Protects dealers from manufacturers’ using export chargebacks to penalize dealers for cars that get exported without dealer’s knowledge; • Prohibits manufacturers from placing a surcharge on the vehicle invoice as a means of recouping warranty reimbursement costs directly from dealers; • Clarifies the current limit on the man ufacturer ownership of dealerships and direct sales of vehicles by manufacturers; and • Addresses various dealer and consumer related issues surrounding recalls, including compensation for parking cars while waiting for parts and disclosure of open recalls to consumers. Massachusetts Auto Dealer JULY 2017
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The Roundup We were back before the Transportation Committee on July 25 testifying in support of three bills related to getting franchised dealerships licensed for vehicle inspection services: S.1911, filed by Sen. Vinny deMacedo (R-Plymouth), H.2736 filed by Rep. Steve Howitt (R-Seekonk), and H.3433, filed by Rep. Chris Markey (D-Dartmouth). The bills would require the RMV registrar, regardless of any internal restriction the agency has in place, to approve a license for an inspection facility to any new car dealer that requests one and who has invested a threshold amount in constructing a new dealership or re-doing an existing store. Finally, one side note regarding the Consumer Protection Committee. In midmonth, Rep. Brian Dempsey (D-Haverhill), chairman of the powerful House Ways and Means Committee, announced that he would be resigning his seat to take a position with a lobbying firm. His resignation created an opportunity for Speaker Robert DeLeo to move a number of existing chairmen around and to name new chairs. One such committee affected was Consumer Protection. The committee’s chair, Rep. Jen Benson (D-Lunenburg), was moved to chair another committee, and Rep. Tackey Chan (D-Quincy) was elevated to fill her slot as the new committee chair. Never a dull moment at the old State House.
Governor Signs New Pregnant Workers Protections Law The following information is provided by attorney Josh Nadreau at Fisher Phillips. Massachusetts just joined 21 other states and the District of Columbia by enacting a comprehensive pregnancy workplace law with unanimous support from the legislature, employee advocates, and the Massachusetts business community. On July 27, Governor Charlie Baker signed the Pregnant Workers Fairness Act (PWFA), which will take effect (appropriately enough) in about nine months – on April 1, 2018.
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At its heart, the PWFA adds “pregnancy or a condition related to said pregnancy including, but not limited to, lactation or the need to express breast milk for a nursing child” to the list of protected classes under the Commonwealth’s anti-discrimination act, but the law goes further than that – it also requires employers to provide reasonable accommodations when appropriate. Massachusetts employers will need to prepare for some changes to their policies and practices in order to comply with this new law. What to Expect. The PWFA will make it illegal for an employer to deny a reasonable accommodation for an employee’s pregnancy, or any condition related to her pregnancy, including lactation or the need to express breast milk. It also bars retaliation against an employee who requests or uses such accommodation. Likewise, employers cannot deny any employment opportunity, such as promotions, transfers, etc. or refuse to hire a pregnant applicant on account of the pregnancy. Several examples of potential reasonable accommodations are provided in the PWFA: • more frequent or longer paid or unpaid breaks; • time off to recover from childbirth with or without pay; • acquisition or modification of equipment or seating; • temporary transfer to a less strenuous or hazardous position; • job restructuring; • light duty work; • private non-bathroom space for expressing breast milk; • assistance with manual labor; and • a modified work schedule. Upon notice from an employee that she is pregnant and seeking an accommodation, you must engage in an interactive process to determine an effective and reasonable accommodation for the employee. Only where an accommodation would cause you an undue hardship may you deny the accommodation request. It is your burden to prove that an undue hard-
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ship exists, and the PWFA includes five factors that will be considered when making such a determination: the nature and cost of the accommodation; the financial resources of the employer; the number of employees; the number, type, and location of the employer’s facilities; and the effect on expenses and resources on the employer’s business. Isn’t Pregnancy Discrimination Already Illegal? Although both state and federal law prohibit the discrimination “because of or on the basis of pregnancy,” those laws only require that pregnant women be treated “the same for all employment related purposes.” They do not provide for any accommodations if such workplace modifications are not provided for similarly situated male employees. Likewise, while the federal Americans with Disabilities Act (ADA) already covers pregnancy-related disabilities such as gestational diabetes, pregnancy alone is not considered a disability under the federal law unless it causes a physical or mental impairment that substantially limits one or more major life activities. The new Massachusetts law will take it a step further. How Should Businesses Respond? In anticipation of the law’s effective date, which will be here before you know it, you should prepare to take the following steps to make sure you stay on the right side of the law: • You should avoid questioning employees and job applicants about their marital status, family planning, or pregnancy. This is not new – these types of questions could already lead to discrimination claims under Title VII and existing state anti-discrimination laws, but this advice is worth repeating given the new focus that will soon be on pregnancy discrimination issues. • You must be prepared to participate in the interactive process in good faith. You should train your managers and your HR staff on compliance with the PWFA. • You should update your handbook and policies to comply with the law’s new requirements; for example, the PWFA
MSADA requires that you provide notice to your employees of their right to be free from pregnancy discrimination by January 1, 2018. You should likewise consider implementing a policy to comply with the law’s notice and medical documentation requirements. • The law also requires you to distribute revised handbooks and policies to all new employees at the beginning of their employment or before they begin, and again to an employee within 10 days’ notification to you that she is pregnant or has a condition related to pregnancy. When Is The New Law “Due”? Like a newborn itself, the PWFA will take effect on April 1, 2018, approximately nine months from its enactment. Massachusetts employers are encouraged to be on the lookout for guidance from the Massachusetts Commission Against Discrimination, and to review their handbooks and policies in advance of this deadline.
Register Today for the “eStar Qualified” EV Dealer Program by Plug In America Plug In America is targeting the greater Boston region for a series of electric car showcase events during National Drive Electric Week (NDEW) from 9-17 September. Volunteers and community stakeholders host the showcase events. This year, with special funding from the U.S. Department of Energy, Plug In America and its Massachusetts state agencies and Clean Cities partners aim to get more people behind the wheel of the latest electric cars available to consumers in the Northeast. The choice of Boston, including the Route 128 Tech Corridor, is designed to support the launch of Plug In America’s “eStar” qualified electric vehicle (EV) dealer program. As part of the program, participating dealerships select members of their sales team to serve as electric car experts or “EV geniuses.” Plug In America then equips these experts with additional training, tools, and resources to make selling electric cars easier and to simplify the
consumer shopping and purchase experience. To that end, the eStar program establishes pre-arranged pricing with eStar dealers. It also ties in multiple incentive streams from automakers, dealers, state agencies, and other sources – that taken together can represent significant savings for electric car buyers. Plug In America also will tap a Google Ad Grant, which provides free Adwords advertising to promote the causes of nonprofits, to drive online search traffic to the Plug In America (pluginamerica.org/ dealers) and DriveGreen with Mass Energy (massenergy.org/drivegreen) websites. Once there, online tools and resources inform electric car shoppers about their choices. They can then choose to connect with specially trained EV geniuses at eStar qualified dealerships. The eStar EV dealer program is unique in that it was designed by dealers for dealers through the active contributions of Plug In America’s Dealer Advisory Committee, itself comprised of some of the nation’s top EV sales experts. The program will begin accepting dealer applications August 2. EV sales training is open to all dealers and will be held on September 6 in Westborough, Massachusetts, to prepare EV geniuses for the series of electric car showcase events that launch with National Drive Electric Week on September 9. Several Boston area communities – including Belmont, Braintree, Cambridge, Wilmington, and Plymouth – will host ride and drive events where visitors can experience the thrill of electric driving. To learn more or to apply to the program, visit www.pluginamerica.org/dealers or email Plug In America at dealers@ pluginamerica.org.
Congress Begins to Tackle Autonomous Vehicles – OEMs Attempt to Bypass State Franchise, Licensing Laws On Thursday, July 27, the U.S. House Energy and Commerce Committee introduced updated legislation that clarified Congress’ intent not to jeopardize
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state motor vehicle franchise and licensing laws as it seeks to fast-track the deployment of highly automated vehicles (HAVs). The updated legislation, House 3388 as amended, was approved by the full committee yesterday during a markup of a number of bills intended to establish federal guidelines for vehicles with advanced design features that can be operated without human intervention. On July 19, the Digital Commerce and Consumer Protection Subcommittee of the House Energy and Commerce Committee approved a draft bill that regulates self-driving vehicles and seeks to prevent a patchwork that would compel automakers to build different vehicles for different states. However, the early draft bill’s federal preemption language could have unintentionally preempted a variety of state-based motor vehicle franchise and licensing laws related to such things as driving education and training, safety and emissions inspections, traffic rules, and how motor vehicles are sold, serviced, registered, insured, and advertised. During the July 19 markup a bipartisan consensus emerged within the Committee that there was no intent to preempt a wide swath of important state laws, including state motor vehicle franchise and licensing laws. Throughout the committee and subcommittee processes your MSADA was in contact with Rep. Joseph Kennedy (D-Brookline), who sits on the full committee and the committee’s subcommittee, to review the matter and to advocate for a resolution of the broad preemption. Yesterday he voted in favor of the consensus redraft. The House bill will now be before the full House for consideration. The House could refer the bill to another committee as part of its deliberations. The issue is under review also in the Senate, where a bipartisan group of Senators is attempting to craft its own version of the HAV legislation. We will keep you informed of developments as they may occur. t
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Troubleshooting
MSADA
Employers Must Accommodate Medical Pot Use By Peter Brennan, Esq.
MSADA Staff Attorney Back in October, this column covered employer drug testing programs in the context of legalized marijuana, as many states, including Massachusetts, had voted to legalize the drug for recreational use. At that time, we advised that Massachusetts employers generally had a right to drug test their employees, and terminate those that failed, to ensure a drugfree workplace, so long as the drug testing policy did not violate an employee’s right to privacy. In light of a recent Massachusetts Supreme Judicial Court (SJC) decision regarding a woman terminated for using medicinal marijuana, employers in the state may have to rethink their drug testing policies. Earlier this month, the SJC issued a decision in Barbuto v. Advantage Sales & Marketing, LLC, siding with the plaintiff that her termination for failing a drug test as a result of medicinal marijuana use may violate the Commonwealth’s anti-discrimination law. The case was the first of its kind to receive a decision from the SJC and could have far-reaching effects on Massachusetts employers. In 2014, the plaintiff, Christina Barbuto, was hired by the defendant, Advantage Sales & Marketing (ASM), to hand out food samples at supermarkets. As a condition of her employment, Ms. Barbuto was required to take a drug test, but she began work before the results of the drug test were known. Ms. Barbuto informed ASM that she would likely test positive for marijuana as she ingested the
drug two to three times per week, outside of working hours, in order to control her Crohn’s Disease, a debilitating gastrointestinal condition. Ms. Barbuto’s marijuana use was medicinal and was prescribed by her physician. Predictably, the results of the drug test showed that Ms. Barbuto had used marijuana. ASM then terminated Ms. Barbuto, citing the failed test. When she protested that she was using marijuana in compliance with the 2012 Massachusetts law that legalized medicinal marijuana, she was told by the employer’s human resources department that the company “followed federal law, not state law.” The Massachusetts Medicinal Marijuana Act, Chapter 369 of the Acts of 2012, explicitly bans discrimination, stating that “any person meeting the requirements under this law shall not be penalized under Massachusetts law in any manner, or denied any right or privilege, for such actions.” Under the medical marijuana act, a “qualifying patient” is defined as “a person who has been diagnosed by a licensed physician as having a debilitating medical condition”; Crohn’s disease is expressly included within the definition of a “debilitating medical condition.” After being terminated, Ms. Barbuto filed an action against ASM with the Massachusetts Commission Against Discrimination, alleging wrongful termination and handicap discrimination. The case progressed to Massachusetts Superior Court, which dismissed the claims, and Ms. Barbuto then appealed to the SJC. The SJC determined that Ms. Barbuto’s Crohn’s disease made her a “qualifying patient” under the Medical Marijuana Act. Additionally, the SJC accepted Ms. Barbuto’s argument that she was a “qualified handicap person” under the Massachusetts anti-discrimination law, because she was capable of performing the essential functions of her job with a reasonable accommodation to her handicap. Here, the reasonable accommodawww.msada.org
tion sought would include ASM granting Ms. Barbuto a waiver from the company’s drug testing policy so that she could continue to treat her Crohn’s disease with medicinal marijuana. The Court rejected ASM’s argument that, because marijuana remained illegal under federal law, they had no duty to accommodate Ms. Barbuto’s treatment. The Court noted that 90% of states had passed some kind of medicinal marijuana law, and pointed out that the state statute expressly did not require the accommodation to extend to the on-site use of marijuana in any place of employment. Additionally, the Court noted that the employer would be at no risk of federal criminal prosecution for possession of marijuana under any circumstances. The court did state, however, that employees subject to federal drug testing guidelines, such as those issued by the Department of Transportation, would be unable to receive such an accommodation. The Court allowed Ms. Barbuto to proceed with her discrimination suit against ASM, but the company will have the chance to defend itself in the superior court by showing that Ms. Barbuto’s medicinal marijuana use would constitute an undue hardship to the company. In light of this decision, Massachusetts dealers should engage with any handicapped employees that seek an accommodation for the medicinal use of marijuana. If you currently have a zero-tolerance drug policy and drug test prospective or current employees, you should consult with your labor attorney about making the necessary edits to your policy and to the employee handbook. t For more information on drug testing please refer to Chapter 25 of the MSADA March 2016 Wage and Hour Guide or contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@ msada.org, or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org, or by phone at (617) 451-1051. Massachusetts Auto Dealer JULY 2017
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AUTO OUTLOOK
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COVER STORY
The Original Before the NADA era, Alvan Tufts Fuller brought the Horseless Carriage to Boston By Gabi Gage
I
N 1899 – 18 years before the founding of NADA – an enterprising 21-year-old Alvan Tufts Fuller took his savings from bicycle races and sales and made his way to Europe in pursuit of a faster, more agile machine. He returned to his hometown of Malden, Massachusetts, that same year and “surprised neighbors by chugging down the street in a horseless carriage.”
“If I am going to make any record in politics, I will have to do it as a business man. In business we have no speechmaking conventions. But I believe the people will appreciate an effort to save them money.” –Alvan Fuller
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MSADA MSADA That carriage was one of two voiturettes – small, four-wheeled, single-cylinder vehicles manufactured by the French De Dion-Bouton company – he brought home. They were the first motor vehicles to enter the port of Boston.
The Cheerful Optimist
The trip would be the first of many and the start of a lifelong legacy in the automotive industry. “The sight of vehicles touring around Europe stirred my grandfather’s passion and imagination and lead to a trip to Detroit,” explains his grandson Peter Fuller, Jr. From Detroit, the Packard Motor Car Company granted Alvan Fuller distributorships for Boston, Albany, and Philadelphia. He opened the flagship Boston Packard dealership and also acquired the local Cadillac franchise. “From there my Grandfather’s business acumen and sales skills kicked in, and he built an enormously successful automotive enterprise,” says Peter Fuller, Jr. Deemed a “cheerful optimist” by his contemporaries, Fuller would build his business as the first major auto dealer in Massachusetts from modest beginnings. “My Grandfather lost his father when he was in high school. As a result, he took on responsibility for helping to provide for his family at an early age,”
explains Peter Fuller, Jr. He worked at Boston Rubber Shoe factory for $7.50 a week to help support his family and had started his own small bicycle agency and repair shop from his Malden barn, while also Alvan Fuller and Henry Ford successfully racing bicycles to victory, capturing several New England titles. His annual “Washington’s Birthday” open house bolstered sales, and he eventually applied the same promotion to his automobile sales. Hence, Fuller is often credited with popularizing the annual Presidents Day Sale before it became a national sales event for U.S. auto dealers, and offering the “pay-as-you-go” sales format for customers. His first official auto sales and service location was on a large tract of marshy land on Commonwealth Avenue in Boston. Nicknamed “Fuller’s Folly” for its distance from downtown, the dealership proved critics wrong with rapid success, and several other auto dealer-
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THE ORIGINAL
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ships sprouted up in the area eventually labeled “Automobile Row.” By 1920, he was named the “most successful car dealer in the world” and had started construction on a new building at 808 Commonwealth Avenue designed by architect Albert Kahn to house Fuller’s flagship Cadillac dealership.
A New Platform
With business running smoothly, Alvan Fuller targeted a new machine: politics – first the state legislature, then Congress, and eventually the governorship of Massachusetts. “With regard to my grandfather’s political career, he felt that he had been extremely fortunate and wanted to give back,” says Peter Fuller, Jr. “If I am going to make any record in politics,” said Alvan Fuller, “I will have to do it as a business man. In business we have no speechmaking conventions. But I believe the people will appreciate an effort to save them money.” A 1919 interview with the then-congressman described Fuller as “forty-one years old, a hard worker, vigorous and studious, keen and clean” and as independent and progressive. Applying his business savvy and knowledge of the inner workings of complex machinery knowledge to the political arena, Fuller sought an “overhauling of our machinery and methods which will enable Congress to function efficiently and economically.” Efficiency, transparency, and money-saving for the taxpayer were integral to the Fuller platform. He was elected Republican governor in Massachusetts 1924, and his governorship coincided with the controversial Sacco and Vanzetti case. After serving two terms, Alvan Fuller retired from political life. He never accepted compensation for his work as congressman or governor. Upon political retirement in 1949, he returned to his auto dealership and focused on Cadillacs and Oldsmobiles. He also turned his focus to charitable causes and the arts until his death in 1958. “His philanthropy and keen interest in the Arts emanated from JULY 2017
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his wife, Viola, who was a wonderful Opera singer in her youth and sparked my grandfather’s interest on collecting and supporting and ultimately donating much of his collection to The MFA in Boston,” says Peter Fuller, Jr. Alvan had married Viola Theresa Davenport in 1910, and together they had four children.
A Century-Long Legacy
In addition to being a Trustee of the Fuller Foundation – the charitable organization founded by his grandfather Alvan, Peter Fuller Jr. continues the auto legacy of his grandfather, and late-father Peter Fuller, with two car and van rental/sales locations in Watertown and Waltham still operating under the family’s dealership license #1, along with a “fledgling electric bike sales and rental business.” As NADA celebrates its centennial in 2017, it also calls to mind its roots in the industry’s spirited first entrepreneurs like Alvan Tufts Fuller and his continuing legacy. Fuller Jr. notes: “On both a state and national level, these dealer organizations are so important in representing Automobile Dealers and the industry’s interests before the state legislature and Congress.” t
MSADA
Legal
By Leonard A. Bellavia, Esq. and Kevin E. Timson, Esq.
Summertime: The Right Time for a Warranty Parts or Labor Reimbursement Your dealership is generating sales up front, but are you keeping an eye on earnings opportunities elsewhere in the dealership? Your fixed operations can be a big source of profit without additional capital, cost cuts, or changes to how you do business – submitting now for a warranty reimbursement parts or labor rate increase with your manufacturer could further unlock additional profit. Maybe you have never submitted and are looking to improve your service department profits or you have submitted before but a new customer-pay matrix or higher repair rates at competitors have made re-applying more attractive. Maybe you just purchased a dealership and your warranty parts markup has gone back down to 40%. Whatever the reason, before you make the submission, your first call should be your attorney, who can tactfully work behind the scenes so as not to create an adversarial relationship between the dealership and your manufacturer. Attorneys can help dealerships analyze issues and draft correspondence during a submission in the same manner that manufacturers use their own attorneys to draft and review submission correspondence. Since the Massachusetts warranty reimbursement statute was updated in 2012, manufacturers, through the help of behind-the-scenes support from their own attorneys, have steadily increased their pushback on submissions by interpreting state laws in ways that limit warranty reimbursement growth. This is why dealerships need help from their own attorneys to help craft reasonable justifications for their reimbursement requests when negotiating with manufacturers. Establishing a warranty parts and labor reimbursement “at retail” is first and foremost a legal process. A dealership’s right to such warranty rates at retail and the manufacturer’s corresponding obligations are embedded in the intricacies of the Massachusetts state law. Here are a few situations where legal counsel, working behind the scenes, makes a big difference:
1) Replying to manufacturer rebuttals: The challenge dealerships face comes after the submission is made, when a manufacturer inevitably responds with legal arguments rejecting a submission and proposing a lower parts markup or labor rate for warranty repairs. Manufacturers will accomplish this by challenging the dealership’s selection of specific repair orders. However, Massachusetts law sets a standard for such challenges, requiring manufacturer proof that the submission is “inaccurate or unreasonable.” While it may seem challenging to justify a dealership’s position here using such ambiguous language, dealerships can borrow processes outlined in other state laws for guidance in analyzing whether the submission is inaccurate or unreasonable. Under Ohio law, for instance, dealerships can compare their circumstances to similarly situated, same line-dealerships in their area to demonstrate a submission’s reasonableness. Discussion can then proceed as to whether the other dealerships selected for comparison to the submitting dealership were chosen based on reasonable criteria. 2) Navigating manufacturer policies and procedures: Each of the twenty-plus manufacturers with whom Massachusetts dealers may work have their own set of rules for reviewing warranty parts or labor submissions, and no two manufacturers handle things in the same manner. To add further confusion, these rules are not always in sync with the Massachusetts statute. With a qualified attorney providing guidance and counsel, a dealership can keep manufacturer discussions focused on the submission’s requirements under the Massachusetts statute, which always trumps a manufacturer’s own set of rules. 3) Retaliation: Qualified attorneys can assist a dealership when manufacturers undertake certain actions that could be viewed as retaliation for seeking warranty reimbursement at retail rates. The Massachusetts statute prevents manufacturers from influencing or requiring dealers to change www.msada.org
their retail customer repair rates. This scenario could occur for a dealership when a manufacturer discovers a sample of retail customer repair orders, performed after the submission is made, that presents a significantly lower parts markup or labor rate for the dealership’s warranty repairs than what was approved by the manufacturer under the submission process. Qualified legal counsel can help dealerships draft correspondence to manufacturers to avoid such a scenario, allowing the dealership to control when warranty reimbursement increases occur and what sample of retail repair orders should form the basis for those increases. With an ever-growing set of demands placed on them by their manufacturers, Massachusetts dealers might be wary of pushback or retaliation from manufacturers if they submit for higher warranty reimbursement. However, these are not serious concerns, because manufacturers understand that they must obey the law, especially when they know that a dealer is represented by experienced counsel, familiar with state law in Massachusetts and other states, to guide a dealership throughout its submission. With the protections afforded to Massachusetts dealers, now is the best time to make another submission to bring your warranty reimbursement up to your current retail rates. t
Leonard A. Bellavia, founding partner of the law firm of Bellavia Blatt & Crossett, PC, is a nationally recognized authority in the field of automotive franchise law.
Kevin TimWar-
son is the lead attorney for the firm’s ranty
Reimbursement Program. They 873-3000.
can be
reached at (516)
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NEWS from the NEWS from Around Around the Horn Horn from Around
NEWS the Horn
HADLEY
Two Students Awarded Scholarships from TommyCar Auto Group Tommy Car Auto Group awarded two students each with a $1,000 scholarship to attend college this fall. The Tom Cosenzi Scholarship received 100 applications by local students this year, and was awarded in July. Lily Rogers of Northampton High School will be attending Yale University. Allison Jenks of Hopkins Academy will be attending University of Connecticut. Both students demonstrated excellence in the classroom and in the community. The Tom Cosenzi Scholarship was established to honor the memory of Thomas E. Cosenzi. When Thomas E. Cosenzi passed away in 2009, it was not only ownership of the TommyCar Auto Group that passed to his children, Carla and Thomas, but his legacy of giving back to the community. That legacy was evident when the two recipients of the 2017 Tom Cosenzi Scholarship were each awarded a check for $1,000. “The Tom Cosenzi Scholarship is dedicated to assisting high school graduates in furthering their education,” said Carla Cosenzi, president of Tommy Car Auto Group. “The combination of academic achievement and community leadership exhibited by these students underscores the core values of this scholarship.”
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Left to Right: Lily Rogers, Carla Cosenzi and Allison Jenks
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Mirak Kicks-Off Solar Project Mirak Automotive Group, a new and pre-owned car dealership and service center in Arlington, has partnered with Hopkinton-based Solect Energy to install a 540 kilowatt solar energy system on the roof of its Mirak Service Center. The solar array consists of 1440 photovoltaic panels and is expected to produce 639,042 kilowatt hours of energy annually. Mirak projects that the array will cover 100 percent of its service facility’s energy needs. Additionally, its excess production will help defray energy costs at other buildings in the Mirak Automotive Group through net metering. Mirak was determined to demonstrate its leadership in sustainable practices and investigated solar as part of its
ORANGE
Mass. Auto Manufacturing History Highlighted As NADA celebrates its 100th anniversary this year, many are highlighting long ago eras of automotive retail. The auto news website Jalopnik dug up the history behind Massachusetts’ own Grout Steam Cars earlier this month. The Grout, built between 1899 and 1912, first featured steam power through a front-mounted boiler. Built in Orange by W.L. Grout, they eventually became gasoline powered in 1904. Two other facts highlighted by Jalopnik: These were among the first cars to feature electric lighting, and they were sold with an attached cow-catcher.
efforts to become a GM Certified Green Dealer. A key component to earning that recognition is a commitment to using renewable energy and pursuing energy efficiency. “It was important to us that we set a good example in the community for sustainable practices,” said Rob Mirak, president of Mirak Automotive Group. “Solect Energy made the process of moving to solar seamless from the outset, with their detailed financial proposal, to the installation, where they made sure there were no disruptions in the daily operations of our dealership and service center. We were very impressed with Solect’s professionalism and attention to detail.” QUINCY
Quirk Impresses Planning Board with Mazda Store Proposal A Quirk dealership proposed near Quincy Center garnered only positive comments in front of the city’s planning board earlier this month. contiued on next page www.msada.org
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Quirk Auto Dealerships plans to demolish the former Yellow Cab building, currently vacant, as well as the Quirk service building currently behind it, to make way for a new 23,994-square-foot Mazda dealership. Quirk’s attorney, Christopher Harrington, addressed the changes to the area of the 92,176-square-foot lot, near the town brook. He said those parts of the property, right now, are largely just paved parking lot, and would see increased green space and a buffer including several catch basins. “It’s an improvement over existing conditions,” he said. Jeff Hynes of the Quincy Center neighborhood association said that his group strongly supports Quirk’s proposal. “If the other businesses in the area were as good as him, we’d be a better neighborhood,” he said. Quirk currently has a small Mazda dealership and service center on the other side of Bracket Street. Harrington said that Quirk will continue to operate that location even when the larger one opens up. CAMBRIDGE
MIT Pursues Flying Car Research Researchers at MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL) are working on drones that can both fly and drive while navigating a city-like area. Think of it as a mini test bed for flying cars that will one day need to deal with buildings, no-fly zones, parking, and other challenges in urban environments. Wheeled vehicles are efficient but limited in where they can go. Flying vehicles are nimble but eat up fuel. If you can combine the two, you can get the best of both worlds. “The ability to both fly and drive is useful in en-
vironments with a lot of barriers, since you can fly over ground obstacles and drive under overhead obstacles,” MIT Ph.D. student Brandon Araki told CNET. The MIT system uses algorithms to figure out the most efficient pathways through a cityscape. It takes advantage of the drones’ dual abilities to get them safely to their destinations. The system can handle up to 80 drones and will keep them from running into each other. JULY 2017
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Sullivan Toyota Selects Building Contractor Sullivan Toyota has selected Polar Design Build, a construction management firm, to build a 39,667 square-foot dealership from the ground-up. The project team is comprised of owner’s representative Richard Vazza, architects The Curtis Architectural Group, civil engineers McKenzie Engineering Group, structural engineers Flood Consulting, and MEP engineers CBC Engineering. The Sullivan Brothers have been selling and servicing vehicles to customers in the Cape Cod and South Shore regions for three decades. The family owns and operates Sullivan Toyota, Sullivan Nissan, Sullivan Brothers Rental Car, and Sullivan Brother Collision Center off Route 3 South. Polar Design will construct the new auto dealership on its current parcel while it continues its active operations in the main building. The firm will implement a modern design on
both the exterior and interior consistent with the Toyota Design Intent Directive and the Sullivan Brothers brand. The Sullivan Toyota dealership is due for completion by March 2018.
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NADA MARKET BEAT
JANUARY 2016
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TRUCK CORNER AUTO OUTLOOK
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Stars & Stripes Fly High as Truck Dealers Roll into D.C.
By Steve Parker
Baltimore Potomac Truck Centers ATD Chairman Steve Parker is chairman of ATD, a division of NADA, in Tysons Corner, Virginia, which represents 1,800 heavy- and medium-duty truck dealerships. He is president of Baltimore Potomac Truck Centers in Linthicum, Maryland, which operates five fullservice commercial truck dealership locations with
Mack, Volvo, and Hino Trucks franchises in Maryland and Virginia.
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As we celebrated the Fourth of July earlier this month and stars and stripes flew high, we must remember that America would not be what it is today without a fight to preserve inalienable rights and protections for life, liberty, and the pursuit of happiness. In that spirit of independence, ATD hosted a successful third annual legislative fly-in that brought commercial truck dealers from around the country to our nation’s capital to fight for the truck industry. We came to urge members of Congress to repeal the harmful federal excise tax (FET) that is hindering the growth of one of America’s most economically robust and important industries. ATD’s grassroots network is second-to-none, and the annual truck dealer fly-in is our opportunity to show Congress that we stand united on the issues that matter most to our businesses, employees, and customers. Thanks to the efforts of our forefathers 241 years ago, we are all fortunate enough to live in a country that allows us to meet with our freely-elected legislators and voice our opinion. Truck dealers and trade association executives met in Washington for two days, and I’m pleased to report that our efforts resulted in a record-breaking 92 Capitol Hill meetings. Each meeting with a member of Congress afforded us the opportunity to discuss the challenges in our business and, simultaneously, the barriers for customers during the truck-buying process. During these valuable faceto-face interactions with officials, we showed them who we are and what we do in the commercial end of truck retailing-a job that is not easy. Most of all, we were able to meet and thank our supporters on Capitol Hill, because we cannot win the fight without their critical help. In that regard, ATD attendees had the privilege of hearing directly from U.S. Rep. Doug LaMalfa (R-California) during the ATD board meeting. He provided us with critical updates on upcoming legislation that can affect our industry and discussed H.R. 2946 as it pertains to the FET repeal. Fighting against the harmful federal excise tax is at the top of the ATD agenda, and I’m pleased to report that H.R. 2946 is gaining traction on Capitol Hill. This bill, introduced by Rep. LaMalfa, would
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effectively repeal the FET on the retail sale of most heavy-duty trucks, tractors, and trailers. As we all know, the FET is harmful to our industry, routinely adding $12,000 to $22,000 to the price of a new heavy-duty truck. Thanks to ATD’s advocacy, H.R. 2946 has gained several cosponsors, but we need more to make this effort part of tax reform this year. I am urging all ATD members to be active: Call or email your House members today. Ask your Representatives to cosponsor H.R. 2946. To contact your House member, visit www.house.gov and enter your zip code, or call the U.S. Capitol Switchboard at (202) 225-3121. On behalf of ATD, I am extremely grateful for all of our truck dealer members. I want to especially thank those who worked hard to make the ATD fly-in another success! When I look back on the week, I am reminded that our dealers’ dedication is second-to-none, and it has truly been a year of historic birthdays. While we celebrated America’s independence earlier this month, I cannot help but reflect that our trade association celebrates its own 100-year milestone this year. NADA’s amazing century-long legacy has helped to establish strong credibility with our elected officials, and it is time to step up our grassroots engagement to eliminate the 100-year-old FET. And we must maintain our lines of communication with our legislators into the future. I urge truck dealers across the country to host your members of Congress this summer when they are home in your districts. The August congressional recess presents a rare opportunity to meet with our elected officials on our own home turf. There are many issues looming, and new legislation is being written. It is vital that we build long-term relationships with our state and federal legislators throughout the entire year. If you are interested in hosting a member of Congress at your dealership or meeting at a legislator’s district office during a congressional recess, contact Patrick Calpin, ATD/NADA director of grassroots advocacy, at pcalpin@nada.org or (202) 547-5500. t
NADA Update
By Don Sudbay
Healthy Demand in U.S. Auto Sales NADA holds steady on yearly forecast of 17.1 million new vehicles sold
Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your
questions
and
concerns
are not coming into stores at the same rate as the past two years, it is critical to keep in mind that those were record years. Sales are declining, but they are most certainly not in a free fall. (2) New-vehicle buyers continue to hold a very strong affinity for their personal vehicles. 2017 is proof-positive that the need and desire for reliable and affordable personal
(donsudbayjr@sudbay.com). As we pass the mid-point of 2017, NADA has taken stock of how the industry is faring so far. Below, you will see that, while demand remains “healthy,” there are a few changing patterns in consumer behavior that could affect our industry-wide bottom line. I hope that, in addition to the action we have seen recently on Capitol Hill, including the stellar work from our ATD counterparts, you have found some time for rest and relaxation this Summer. We have a busy few months ahead at NADA as we prepare for our September Washington conference, and I look forward to sharing more about what we have in store soon.
NADA Issues Six-Month Outlook Update With six months of U.S. new-vehicle sales in the books, NADA is holding steady at its original sales forecast of 17.1 million new cars and light trucks for 2017. Through the first six months of the year, 8,401,715 new light-vehicles were sold, down 2.2% compared to last year. “Overall consumer demand for new vehicles is still very healthy,” said NADA Chairman Mark Scarpelli during NADA’s quarterly economic briefing. “Consumer tastes continue to trend away from sedans and toward light trucks and SUVs. Sedans now account for 37 percent of sales, meaning that roughly two out of every three retail transactions are now a light truck, SUV or crossover. Simply put, there is great demand for the utility that SUVs and light trucks provide.” Scarpelli, president of Raymond Chevrolet and Raymond Kia in Antioch, Illinois, and co-owner of Ray Chevrolet and Ray Chrysler-Jeep-Dodge-Ram in Fox Lake, Ill., highlighted three “big-picture takeaways”: (1) It is important to note that there is little to indicate a broader weakness or fall off in sales as some analysts have suggested. Overall economic growth remains strong, and the trends that are fueling consumer demand across the economy are still positive. And while new-vehicle buyers
“Overall economic growth remains strong, and the trends that are fueling consumer demand across the economy are still positive.” transportation is alive and well, and that sales of new vehicles will continue to be a cornerstone of industry - and broader economic - health for years to come. (3) It is still a great time to be a consumer shopping for a new vehicle. The mix of makes, models, and features is as good as it’s ever been, and the competition among competing brands for customers is fierce. And because of the franchised dealer model, consumers are benefiting from an additional layer of intra-brand competition. We know from empirical research that intra-brand competition lowers prices for consumers, and as a dealer I can tell you that these competitive forces are present in abundance on the ground. NADA Chief Economist Steven Szakaly added that the “typical stresses and strains from rising interest rates, excessive lending, and overall weak consumer spending are not visible in the broader economy.” “There is little indication that the Fed’s rate raising actions have as yet had any impact on overall growth,” Szakaly said. Szakaly highlighted three areas of concern about consumers, incentives, and inventory: (1) There are some fundamental changes to consumers and their buying patterns. For example, loan financing terms have extended to nearly six years. This leaves consumers
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NADA Update waiting longer to get into a net equity position, pushing into the fourth year of ownership compared to three years before the financial crisis. (2) We have seen some deterioration in credit scores overall for new-vehicle loans. But here again it is important to separate what is really hype from some important realities. Strong employment growth and low unemployment levels make some consumers a less risky credit bet. If it is easy to find a job or to find a new job, the odds of making a payment
“It is difficult to see sales falling below a long-run rate of 16.5 to 16.8 million. This would still represent a strong market.” across all credit scores improves. It is a natural part of the cycle to expect consumers with improving financial positions to enter the new-vehicle market. It is, after all, nearly a decade since the last recession. People with improved financial positions are expected to look at new purchases and one of those large purchases are new vehicles. (3) As for rising incentives, they largely remain in unpopular sedan segments. We do expect incentives to continue to rise this year especially as off-lease vehicles begin to exert further downward pressure on sedan pricing throughout the rest of 2017. In our own pricing analysis, the weakness in new- and used-transaction prices remain heavily concentrated in the sedan segments. Adding to the pressure on sedans is the reality of off-lease vehicles concentrated in sedan segments. We expect about 200,000 new-vehicles buyers to drift into the used-car market as the value proposition from off-lease vehicles will simply be too tempting. It is important to remember that manufacturing often lags consumer signals, it can take months to adjust production. Incentives can be an important tool to bridge the gap between when consumers begin to leave a segment and when production is finally reduced. Rising inventories continue to signal that the industry continues to seek a balance. We expect inventories to continue to rise into September before falling. A critical indicator for where incentives and sales in fall and winter will be whether we see inventories level off
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MSADA in the third quarter. “Record sales years do not last forever, and what we have seen is that the industry has moved steadily toward a model that is more productive and flexible particularly on the new-car side,” Szakaly added. “Given these still stronger than average market fundamentals it is difficult to see sales falling below a long-run rate of 16.5 to 16.8 million. This would still represent a strong market.”
Save the Date for NADA Show NADA Show 2018 (formerly the NADA Convention & Expo) returns to Las Vegas for four days running from Thursday, March 22, to Sunday, March 25. “The NADA Show provides one of the best networking opportunities in the industry—from attending the dealer-franchise meetings and workshop sessions to shopping for the latest products and services in the exhibit hall,” said Richard Stephens, NADA Show committee chairman. “Attendees will be among the first in the industry to see what’s new and what’s next in automotive retailing.” The keynote speakers will be announced soon. Online registration for dealers and their managers, which includes an early-bird discount and hotel selection, opens Oct. 2, 2017. Learn more at www.nadashow.org
White House Unveils Its Plans for Remaking NAFTA The Trump administration released its road map in July for remaking the North American Free Trade Agreement that aims to preserve “Buy America” provisions and reduce the U.S. trade deficit, but steps back from some of President Donald Trump’s most fiery campaign rhetoric on trade with Mexico and Canada. The Mexican auto industry, the country’s largest manufacturing sector which accounts for about a third of Mexico’s factory exports, does not want any changes in its rules of origin. Imported components from Asia represent less than 3% of a car’s value, according to estimates from the Mexican government. U.S.-based car manufacturers also have pushed back against significant changes to the rules of origin.
June Auto Default Rate Sets 10-Year Low Perhaps the auto loan component of the S&P/Experian Consumer Credit Default Indices is becoming a game of “how low can you go?” A month after the rate tied a 10-year low, S&P Dow Jones Indices and Experian released data through June and determined auto loan defaults decreased 3 basis points from the previous month to settle at 0.82 percent. t
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